3 Ways Hollywood May Change Permanently After the Pandemic

hollywood after the pandemic

The resounding wish throughout the ongoing coronavirus (COVID-19) pandemic is for things to return to normal. But as the pandemic wears on, it’s becoming increasingly clear that nothing — the state of the economy, the medical industry, the way that people conduct their daily lives — will be able to return to that state of “normalcy” that we crave. The world will inevitably be different once we emerge from the pandemic. But how different?

For Hollywood, the industry will be “permanently changed,” according to a new report from MoffettNathanson. The report, ominously titled “Say Goodbye to Hollywood” predicts that the pandemic has accelerated a shift that was already taking place in the movie industry: the rise of streaming services and the downfall of the studio system as we know it.

A new report from independent research boutique MoffettNathanson predicts that Hollywood will be permanently changed when it emerges from the coronavirus pandemic, according to The Hollywood Reporter.

“We have a strong belief that the production and distribution of media content will be permanently changed by this crisis,” Michael Nathanson wrote in the Friday report titled “Say Goodbye to Hollywood.” A few of the predictions that Nathanson makes are expected: streaming platforms will become the primary creators of content, movie theaters will suffer major financial losses, and mid-budget movies are all but dead. But not all is doom and gloom for the movie industry as we know it: Nathanson paints a picture of the future in which movie theater exhibitors and streamers come to an “agreement” that would “serve the interests of both,” but drastically lessen the theatrical window — much as how theatrical releases are dropping early on digital now.

Streaming Will Be King

The most obvious prediction of Nathanson’s report: streaming platforms will overtake studios as the major power in Hollywood.

“Heading into 2020, we had argued that the fundamental pillars of media were starting to crack,” Nathanson wrote in his report, adding that the pandemic has accelerated “customer behavior” shifts to streaming platforms:

“Now, we fear that they will crumble as customer behavior permanently shifts to streaming models. The impact should be felt in both the traditional TV ecosystem and the film industry as content producers reexamine the economics of producing linear TV content and feature films. As a result, when this is all done, the top streaming platforms — Netflix, Amazon and Disney — will emerge with the lion’s share of scripted content creation.”

This is not surprising, considering streaming giant Netflix is one of the rare companies to benefit during this pandemic, and has since overtaken Disney as the most valuable entertainment conglomerate. But Netflix likely won’t hold that crown for long — Nathanson singles out Netflix, Amazon, and Disney+ as the major streaming platforms that will come out on top after the pandemic, with more original content and library titles available on these services than most other services.

Expect More Studio Mergers

So is this the end of the studio system as we know it? Not exactly, but Nathanson suggests that the major Hollywood studios will begin to consolidate to compete with streamers. “Aside from Disney and their control of Disney+/Hulu and (AT&T/WarnerMedia’s) Warner Bros. with HBO Max, the three other majors (Sony, Paramount, Universal) and the two minis (MGM and Lionsgate) will likely need to consolidate to increase selling clout and accelerate cost savings,” Nathanson said.

Nathanson compared the shift to the one that the music industry underwent a few years ago, when the “six once-mighty global recorded music companies merged into three healthier ones” to survive amid the emerging digital music industry. The music industry survived by “leveraging their copyright assets over a new crop of streaming distributors,” Nathanson noted. But Hollywood won’t follow the exact same path, as “the streamers have decided to build out and own their own copyright.”

With studios merging to compete with streamers, their output will have to compete as well. Which means what we’ve all feared: no more small- to mid-budget movies. This will be the era of the tentpole, which we’ve already seen with the rise of Disney’s uber-successful Marvel Cinematic Universe and Star Wars franchise, and other studios’ attempts to ape them. Studios will be even less willing to take risks on mid-budget films, as they invest in more surefire successes like blockbusters or well-known IPs. “It is the small- to medium-sized budget movies that we worry about,” Nathanson wrote. “We have already seen the share of movies that generate under $100 million at the domestic box office fall from 52 percent in 2010 to 39 percent in 2019, and we expect this trend to accelerate further. Mid-budget, non-tentpoles will not be worth the cost and expense of traditional theatrical distribution.”

Movie Theaters Will Close, While Ticket Prices Go Higher

Nathanson predicts that there will be fewer movie screens across the U.S. “Clearly, as a result of the current shutdowns, 2020 will end up as a fraction of [the] historical admissions range,” he explained. “However, we think there will be lasting implications on future attendance even after fears around COVID-19 abate given the moves from both the studios and streaming services.”

To survive, movie theaters will push ticket prices higher, but invest less in renovations and upgrades as they try to make up for pandemic losses. “The broader adoption of streaming services that will offer their own selections of original film choices, the slowing theater upgrade cycles due to the need to repair balance sheets and the fact that many theaters are connected to zombie malls will hurt film attendance and shrink the number of screens in the industry,” Nathanson concluded. “As a result, ticket prices will need to be raised, and as we have seen in other industries, that is typically the worst thing to do when demand weakens.”

But movie theater exhibitors might survive by coming to an “agreement with Netflix and other SVOD services producing their own original movies (and some acquired from other Hollywood studios),” Nathanson wrote:

 “We think it would serve the interests of both exhibitors and Netflix to reach an agreement (that would likely be applied to other major studio product as well for non-tentpoles) in order to help fill in any lost product directly from the major studios. Looking out, if indeed this happens, we see the potential of more aggressive theatrical windowing strategies for studios and the shortening of home video and pay 1 windows.”

This means theatrical windows will become even smaller, while home video rental and purchase dates will be moved up — which we’ve already start to see happen during the pandemic. Does this render the sanctity of the two-week award-contending theatrical release redundant? Yes, Nathanson said. “In essence, this crisis could likely accomplish what theaters have, up to this point, long feared,” Nathanson concluded.

The post 3 Ways Hollywood May Change Permanently After the Pandemic appeared first on /Film.




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